Is NAT only acceptable as a firewall setting

I have a newly setup Actiontec M1000 ADSL modem for use with DSL service. The default firewall setting is NAT only. Is that acceptable for security purposes? Would configuring it with both a high level firewall setting and also NAT provide any better security?

NAT provides good inbound protection against unsolicited worms. This is because it denies any inbound packets that do not correspond to an outgoing connection.
This is only part of what a good firewall

An unconfigured NAT usually blocks all connections from the internet to your computers behind the router. That gives plenty of security to all computers behind it from attacks coming from outside, however it does not block connections from your network to the internet, of from your network to your network. In other words it does not protect your computers from each other and does not guarantee that a previously infected computer be unable to contact its overlord.

in your office you have a office telephone number with extension. No outsider knows your extension number but only know your main office number. When some one is looking for you an operator will check on the routing table. If the name and extension is match, then the call will be establish.

Somehow it does get echoed that NAT is for security. NAT was never meant for security and does provide no security by hiding the ip address as well. NAT is available for all the routers so that you can change to a public ip when you're on internet.

So do not consider NAT for security. Even if you NAT, the other party can identify your true ip address with the latest of browsers and technologies available now, unless you're paranoid and pretty much tighten up all the security.

Another way to look at it, say you have 10.1.1.1 and you NAT it to 100.1.1.1, still anything that contacts 100.1.1.1 goes to 10.1.1.1 and NAT has no functionality to prevent it. It is the firewall's other mechanism's (like access-lists) that blocks/allows connections and NAT by itself doesn't do anything other than converting the ip to and fro.

NAT provides good inbound protection against unsolicited worms. This is because it denies any inbound packets that do not correspond to an outgoing connection.

This is only part of what a good firewall does, things like Stateful Packet Inspection(SPI) go further by checking whether the incoming packet makes sense for the current connection, ie is it using the same protocol, is it trying to start an already started connection etc. Though I could not find documentation for your modem I suspect that this is what the firewall setting does.

Outbound protection is rare and difficult to administer on a router except in enterprises. It is usually the function of software on your computer. This will prevent unauthorized programs from connecting to the internet. I highly doubt your router has any such functions.

The summary, turn the firewall setting on unless your connection is exhibiting problems, and do not assume that this takes away the need for a firewall on your computer.

As for the hiding your IP thing, any connection between you and another computer by definition means that the other computer has your public IP address no firewall can prevent that. Some will strip browser headers so that websites cannot see what version of Windows you are running etc.

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